KUALA LUMPUR (April 26): The Malaysian Government will ultimately bear 1Malaysia Development Bhd's (1MDB) debt obligations guaranteed by International Petroleum Investment Co (IPIC), according to Petaling Jaya Utara MP Tony Pua.

The Malaysian Government via Minister of Finance Inc owns 100% of 1MDB. Prime Minister Datuk Seri Najib Tun Razak, who is also finance minister, is chairman of 1MDB's advisory board.

In a statement today, Pua said the Government's debt-asset swap arrangement with IPIC indicated that the Finance Ministry would indemnify IPIC of all its obligations including advances and interest payments on behalf of 1MDB.

Pua said, "Ultimately, IPIC will make the claim on the Malaysian Ministry of Finance based on the inter-guarantor agreement."

Pua's statement was in response to 1MDB's statement today that it had defaulted on the US$50.3 million (about RM198 million) interest payment for the US$1.75 billion bonds issued by its unit 1MDB Energy (Langat) Ltd.

1MDB, however, insisted that the risk of cross default on other bonds issued by company was limited. 1MDB's statement today was in response to IPIC's statement to the London Stock Exchange yesterday.

IPIC said it would pay the US$50.31 million interest to 1MDB Energy (Langat) bond holders "but only after 1MDB defaults on its payment obligations in respect of such notes".

Today, Pua said Najib needed to explain how the Government would remedy the situation.

"The Minister of Finance cannot continue to remain silent on this matter as this is the single largest default by any Government subsidiary ever in the history of Malaysia.

"Datuk Seri Najib Razak must provide a full and satisfactory explanation on the financial disaster taking place before our eyes and outline the steps which will be taken to remedy the situation," Pua said.